T-Mobile takes $3 billion AT&T breakup fee, builds 4G-LTE network

With AT&T's bid to purchase T-Mobile having failed, T-Mobile is now investing …

When AT&T finally admitted defeat in its bid to purchase T-Mobile USA, the company said the failure of the acquisition would harm customers and stifle "needed investment."

But things haven't quite worked out that way. While AT&T panned T-Mobile's prospects as an independent carrier in a world moving from 3G to 4G speeds, T-Mobile is now using the breakup fee it received from AT&T to build a new LTE network. T-Mobile announced on Thursday a "$4 billion network modernization and 4G evolution effort, which will improve existing voice and data coverage and pave the way for long term evolution (LTE) service in 2013." T-Mobile expects to cover "the vast majority of the top 50 markets."

When the T-Mobile/AT&T merger fell through as a result of opposition from the Justice Department and Federal Communications Commission, it was announced that T-Mobile would receive a $3 billion breakup fee from AT&T, which is surely helping to fuel the company's network modernization effort. The $4 billion investment figure touted by T-Mobile includes $1.4 billion in "incremental network investment" over the next two years. While it seems AT&T's prediction about stifling of needed investments hasn't come to pass, T-Mobile still faces a difficult road.

T-Mobile (which is also trying to block Verizon Wireless's planned purchase of additional spectrum) lost 800,000 customers in the most recent quarter, and is "the last of the four major US operators" to hop on the LTE bandwagon, Ovum Chief Telecom Analyst Jan Dawson said in a statement. "T-Mobile will be late to the LTE party, and its coverage will lag its major competitors for some time. Marketing the service will be tough when it has spent the last several years convincing its customers it is already offering 4G."

I might consider moving to T-Mobile if they had it. I dislike AT&T for continuously making things more expensive (higher upgrade fees, only large text plans, high sms pricing), as well as ripping off users on 'unlimited' data plans and the fact their data network is atrocious every time I visit NYC.

How many of those 800k were specifically because of the impending AT&T acquisition? How many were people not signing up until they knew the status of the buyout? Maybe they'll see an uptick now that the deal is really dead? Of course, all those people who didn't sign with t-mobile probably still signed a new contract with someone, so it'll be a year or two before they can return to t-mobile [without breaking a contract], even if they want to.

I only left T-Mobile because my wife wanted an iPhone and we moved to an area where they didn't have adequate coverage. Their prices were cheaper than Verizon and their customer service was good when I rarely had to call them. I'm glad they are sticking around.

This isn't anywhere near what TM needs to make required network improvements. AT&T and Verizon each spend well over $10 billion a year to expand and improve their networks. Unless TM can spend the same, they will never be able to keep up, much less gain on the big two. This is one of those chicken and the egg situations. Without more subs coming in, they won't have the money to do the needed work. Without the needed work being done, they will continue to lose subs.

While $4 billion sounds like a lot of money, it's really just enough to get the first stage done. What do they do after that?

For at least two years, both Sprint and TM have been complaining that the lack of the iPhone was causing losses in subs and profits. Now, Sprint is getting more subs because of the iPhone, and TM is still complaining that most of the sub loss is because of the lack of same. They have a lot of problems here, and this windfall from AT&T isn't going to fix them. This is good for publicity, but not much else.

I assume the CEO of AT&T was fired over this blunder right? Joking, I know there is no corporate responsibility, but being forced to give your competitor $3 billion to build their network (along with more spectrum) will go down in history as one of the worst moves ever!

I assume the CEO of AT&T was fired over this blunder right? Joking, I know there is no corporate responsibility, but being forced to give your competitor $3 billion to build their network (along with more spectrum) will go down in history as one of the worst moves ever!

Not fired, but he had his compensation cut severely because of this. What will happen next year is something else.

For at least two years, both Sprint and TM have been complaining that the lack of the iPhone was causing losses in subs and profits. Now, Sprint is getting more subs because of the iPhone, and TM is still complaining that most of the sub loss is because of the lack of same. They have a lot of problems here, and this windfall from AT&T isn't going to fix them. This is good for publicity, but not much else.

That's myopic. It's not just an issue with not having the iPhone, but their selection of phones (in general) suck. These guys still don't even have the Galaxy Nexus (thanks to a Verizon deal). The phones they do have aren't all that compelling to me and it makes me wish I could just buy the GN directly from Google and use T-Mobile service like I did with my Nexus One.

This isn't anywhere near what TM needs to make required network improvements. AT&T and Verizon each spend well over $10 billion a year to expand and improve their networks. Unless TM can spend the same, they will never be able to keep up, much less gain on the big two.

It's not that simple. T-Mobile focuses on urban and suburban areas, and pretty much ignores the costly low-profit rural areas that AT&T and Verizon service. In major cities T-Mobile coverage is often much better than AT&T and Verizon, and most people don't regularly go to the poor coverage areas so it's not an issue. I imagine subscriptions will pick back up now, a lot of people were very wary of signing a contract if it was going to turn into AT&T halfway through.

Quote:

I'm not sure why it would be his fault. The deal was broken up due to government intervention, not any sort of blunder on AT&T's part.

Ovum Chief Telecom Analyst Jan Dawson said in a statement. "T-Mobile will be late to the LTE party, and its coverage will lag its major competitors for some time. Marketing the service will be tough when it has spent the last several years convincing its customers it is already offering 4G."

Yeah except TMO's HSPA+ is a lot faster than any LTE and already sclaes up to 50+ Mbit/s if needed.

This isn't anywhere near what TM needs to make required network improvements. AT&T and Verizon each spend well over $10 billion a year to expand and improve their networks. Unless TM can spend the same, they will never be able to keep up, much less gain on the big two. This is one of those chicken and the egg situations. Without more subs coming in, they won't have the money to do the needed work. Without the needed work being done, they will continue to lose subs.

While $4 billion sounds like a lot of money, it's really just enough to get the first stage done. What do they do after that?

For at least two years, both Sprint and TM have been complaining that the lack of the iPhone was causing losses in subs and profits. Now, Sprint is getting more subs because of the iPhone, and TM is still complaining that most of the sub loss is because of the lack of same. They have a lot of problems here, and this windfall from AT&T isn't going to fix them. This is good for publicity, but not much else.

This is clearly BS, classic example of some half-@ssed FUD.

1. TMO only focuses on metropolitan areas - rightly so because according to the two latest census data 85%+ of the population live in these areas.

2. In these metropolitan service areas TMO's service is MUCH better and FASTER than any other provider.

3. Despite what Apple shills love to believe the majority of the population does not give a shit about iPhone...

Ovum Chief Telecom Analyst Jan Dawson said in a statement. "T-Mobile will be late to the LTE party, and its coverage will lag its major competitors for some time. Marketing the service will be tough when it has spent the last several years convincing its customers it is already offering 4G."

Yeah except TMO's HSPA+ is a lot faster than any LTE and already sclaes up to 50+ Mbit/s if needed.

Idiot.

4G LTE: 100mbit for high movement like cars and 1gbit for low movement like pedestrians. Peak upload 500mbit

This isn't anywhere near what TM needs to make required network improvements. AT&T and Verizon each spend well over $10 billion a year to expand and improve their networks. Unless TM can spend the same, they will never be able to keep up, much less gain on the big two. This is one of those chicken and the egg situations. Without more subs coming in, they won't have the money to do the needed work. Without the needed work being done, they will continue to lose subs.

While $4 billion sounds like a lot of money, it's really just enough to get the first stage done. What do they do after that?

For at least two years, both Sprint and TM have been complaining that the lack of the iPhone was causing losses in subs and profits. Now, Sprint is getting more subs because of the iPhone, and TM is still complaining that most of the sub loss is because of the lack of same. They have a lot of problems here, and this windfall from AT&T isn't going to fix them. This is good for publicity, but not much else.

I agree 100%. I just left T-Mobile for Verizon. I liked T-Mobile alot. Their service in cities was really good, customer service was great, however, I frequently traveled to too many places where their network was only 2G (both EDGE & GPRS). Except in a few areas with good EDGE connectivity, this made my smart phone worthless to me in these areas.

I've heard estimates that it would cost T-Mobile between 9 and 13 billion to build a complete nationwide LTE network. (I don't know if it included purchasing spectrum or not). I'm just curious if a nationwide LTE network is needed right now? With their HSPA+ network currently running at 42mbps, and with an upgrade to 84mbps in the (near?) future, When I was on T-Mobile 3G (err...4G), I was never "dying" for LTE speeds...I was quite happy with the speeds I received on my phone.

I'd personally suggest that T-Mobile use the $3 Billion to increase the coverage area of their HSPA network, and only invest in LTE in certain markets where the spectral efficiency increases makes sense. (Such as New York) and save a wider roll-out of LTE for later. (Oh...once fiber is run to a cell site, a huge cost of upgrading to LTE is already removed)

I'm not sure why it would be his fault. The deal was broken up due to government intervention, not any sort of blunder on AT&T's part.

True, but let's be honest. He should have seen it coming. We all did.

As for the subject of the article, I'm all for T-Mobile building out more spectrum and an LTE network. I've been with T-Mo since my first cellphone, and while their coverage leaves a bit to be desired, I couldn't be happier with the way they treat me as a customer. And that's a rare commodity in the wireless market.

I'm not sure why it would be his fault. The deal was broken up due to government intervention, not any sort of blunder on AT&T's part.

"Not any blunder"?!?

You're right, it was the big bad government who cruelly prevented poor little AT&T from proceeding with their totally honest plan to create new jobs while simultaneously making cellular service better for everyone and lowering prices due to fantastic new competition.

In fact, to redress this outrageous harm you should mail a donation to the CEO of AT&T for the amount that his pay was reduced so he can be back up to the $27,000,000 he was paid the previous year.

(I'm sure you can work out a payment plan if you can't come up with the total amount today.)

You should also have reported, that T-Mobiles mother company, Deutsche Telekom, reported a loss of €1.3 billion last quarter (and that's including the $4 billion payoff from ATT). This was mainly due to the disaster at T-Mobile US. And the situation at T-Mobile is actually worse, not only did they loose 700k customers last quarter, they actually lost 1.7 million over the whole fiscal year!And it gets worse, most other subsidiaries of Deutsche Telekom are operating at a healthy profit. The only one operating as bad as the US division is the one in greece, but they got a valid excuse. So pressure is mounting on Deutsche Telekom's leadership to do something about the US division. It's questionable if the $4 billion will bring T-Mobile into profit zone shortly. Stock prices of Deutsche Telekom actually dropped another 3% today after reporting this numbers, and that after a long decline during the last year.So, T-Mobile customers in the US should be prepared for a long bumpy ride. And to the other comments above: The ATT payoff sure as hell wasn't a very good deal for T-Mobile or it's mother company. At the very least, it adds a little sweetness to a total fiasco.

I assume the CEO of AT&T was fired over this blunder right? Joking, I know there is no corporate responsibility, but being forced to give your competitor $3 billion to build their network (along with more spectrum) will go down in history as one of the worst moves ever!

Not fired, but he had his compensation cut severely because of this. What will happen next year is something else.

His compensation was cut from $24 Million to $22 Million. I wouldn't call that severe.

Ovum Chief Telecom Analyst Jan Dawson said in a statement. "T-Mobile will be late to the LTE party, and its coverage will lag its major competitors for some time. Marketing the service will be tough when it has spent the last several years convincing its customers it is already offering 4G."

Yeah except TMO's HSPA+ is a lot faster than any LTE and already sclaes up to 50+ Mbit/s if needed.

Idiot.

4G LTE: 100mbit for high movement like cars and 1gbit for low movement like pedestrians. Peak upload 500mbit

It may not be theoretically faster, but there have been some field tests that show that the LTE in use now, is not on average faster than HSPA+. Also current LTE tech is not kind to batteries. The tradeoff doesn't make sense with current tech. However, the tech will improve, and LTE will pull ahead.

I'd much rather see Tmo use this money to increase the area and coverage of their current "4G" network. Cover the highways, and increase coverage is some mid-size markets.

The fact that I can stream Netflix without a hiccup to two separate devices using WiFi tethering on their current network means it's plenty fast to me. I just want that speed in more places. Thanks.

Ars forgot to cover how much that breakup fee cost their big kahuna at ATT. ;D

Uh, he still has his job and $22M in compensation for the year, I guess it cost him the upgraded interior on his G6. Personally I'm pretty sure if I cost my company 20% of net operating income I'd be fired.

Ars forgot to cover how much that breakup fee cost their big kahuna at ATT. ;D

Personally I'm pretty sure if I cost my company 20% of net operating income I'd be fired.

Well, as the linked article shows, he lost 20% of his net operating income as well, so fair is fair.

(And as a reluctant AT&T customer, I assume I'll be seeing a 20% rise in my bills to compensate. Not in any obvious way, mind you, but the accountants at AT&T are creative and will figure out how to get it all back in the long run.)

That's myopic. It's not just an issue with not having the iPhone, but their selection of phones (in general) suck. These guys still don't even have the Galaxy Nexus (thanks to a Verizon deal). The phones they do have aren't all that compelling to me and it makes me wish I could just buy the GN directly from Google and use T-Mobile service like I did with my Nexus One.

Most interesting to me: they're going to refarm their 1900 MHz holdings, reducing the amount of PCS spectrum devoted to 2G GSM to deploy additional HSPA+, which means 3G/"4"G ("fauxG?") coverage for unlocked GSM iPhones on T-Mobile. Of course, that doesn't really help T-Mobile all that much if they still can't sell a subsidized iPhone (or offer one with their Value Plan financing), but maybe they think they can convince Apple to reduce their asking price if they don't have to add an AWS radio?

Ovum Chief Telecom Analyst Jan Dawson said in a statement. "T-Mobile will be late to the LTE party, and its coverage will lag its major competitors for some time. Marketing the service will be tough when it has spent the last several years convincing its customers it is already offering 4G."

Yeah except TMO's HSPA+ is a lot faster than any LTE and already sclaes up to 50+ Mbit/s if needed.

Idiot.

4G LTE: 100mbit for high movement like cars and 1gbit for low movement like pedestrians. Peak upload 500mbit